The case involves a ponzi scheme that led to criminal charges
The Ontario Superior Court of Justice has rejected an appeal against a decision made by the Capital Markets Tribunal in a case involving fraud in the sale of healthcare products.
Following an investigation by the Ontario Securities Commission (OSC) in 2017, authorities charged Xiao Hua Gong and his company with fraud. After his company pleaded guilty to using forged documents and operating a pyramid scheme in 2021, the criminal charges against Gong were dropped.
The OSC initiated proceedings against Gong in 2022, citing allegations similar to those his company admitted in the criminal case. Before the tribunal, Gong unsuccessfully attempted to block the OSC from using evidence obtained during the criminal investigation. He argued that the OSC needed the Attorney General’s consent for such use, based on a precedent set by the Court of Appeal. However, the tribunal found that the OSC had gathered this evidence independently, not from the Crown or police, and dismissed Gong's motion.
Gong appealed this decision, but the OSC contested it, claiming the appeal was too soon since the tribunal's decision was not final. The court agreed, noting that only final decisions of the tribunal are subject to appeal. As a result, it quashed Gong's appeal as premature.
Persisting, Gong moved to overturn this quashing, arguing that the tribunal's decision regarding third-party rights was final and that advancing the case could violate privacy interests. However, the court confirmed that the tribunal’s ruling on the pre-hearing motion did not resolve the case against Gong, affirming that the appeal was premature and dismissing Gong’s motion.
The court noted that the motion judge applied the correct law in deciding whether the tribunal’s decision was final. The court has previously found that a final decision under the Securities Act determines the merits of the allegations against a defendant, including the imposition of a sanction.
The Ontario Superior Court of Justice concluded that the motion judge made no error in finding that the tribunal’s decision on Gong’s pre-hearing motion was not final, and, as a result, the court has no jurisdiction to hear his appeal.
As for the costs, both parties have hinted at their expectations, with Gong proposing a nominal sum for a successful outcome while the OSC sought substantial indemnity costs. The court has directed both parties to submit detailed cost proposals for further consideration.
